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“Cyprus in your Heart” is the tourism slogan of the small Mediterranean nation of Cyprus. It is a member of the Eurozone. Perhaps you’ve seen headlines, the last couple of weeks, about its banking crisis. This post is to sum up a few points about it.

The Europeans plan to resolve the crisis with yet another bank bailout.

This bailout is different. For the first time, bank customers (depositors) will be hit with losses. “Small” or “insured” depositors under 100,000 Euro will be left alone; but over that amount, depositors could lose 20%, 40% or more of their money in the bank.

That’s important. It’s a dangerous precedent. It means that “money in the bank” isn’t all that safe. Not in Europe; and if you believe a similar crisis could happen in the U.S. eventually, then not here.

They were originally going to hit even the depositors under 100,000 Euro. That would have been an even more dangerous precedent. Thank God, the Cypriot parliament refused.

The Russians are quietly furious with Europe, over all this. Cyprus had been sort of the Russians’ Cayman Islands or Switzerland; the Russians’ banking haven. Russian depositors may be hard hit (although some say that the clever Russians had already withdrawn their money).

Also, Cyprus has a strategic location near Turkey and Israel, and important natural gas fields. So Russia and the EU both want it as their satellite. The Europeans were determined to keep Cyprus from withdrawing from the Euro.

*IF* this outcome means that Cyprus stays with the Europeans (rather than the Russians – and I’m not sure if it does mean that, in the long run), it’s probably good for Israel.

But for now, Cyprus will be hit with a severe depression, as its “Russian banking tourist” industry is gone, probably forever.

These developments have the Cypriots up in arms, feeling like their futures have been stolen. A few pictures here.

This all goes to the importance of money as a social contract. People put their trust in money as the basis for trading with each other, in all kinds of ways. If people’s bank accounts are violated – and/or, if the value of money is violated – then people feel hurt and disoriented, because a key social contract has been violated. I may say more about that in a future post.

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Hmmm….. Will anything short of total anarchy convince the other European partners not to try the same thing? I thought I saw something on Drudge that Spain and Italy are considering the same plan. Seizing private property to pay for the government’s incompetence could become a trend.

I don’t feel right wishing that Cyprus implodes, but I’m not sure that any other outcome will stop this from spreading.

Europe, and the rest of the world, really, has had a long history of governments seizing all the wealth in banks. And anywhere else they could find it. Cyprus is this decade’s version.

And their economies have always wildly swung from prosperity to poverty, stability to crisis. And every time it’s the same reason: the government sees the wealth – and takes it. Then there’s no more wealth to take, and the government allows it to build up again. It’s a merry go round over there.

I like Russian PM Medvedev’s line about Cyprus. Translations vary, but the essence is “The stealing of what was already stolen, continues there.” It’s a reference both to Lenin/Communism, and to the Russian mob.